Arthur I. Cyr: Placing a call has changed our economy, society and us

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Oct 26, 2016 at 12:33 PMOct 26, 2016 at 12:33 PM

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The telecom hills are alive with the sound of mergers. On Oct. 22, AT&T announced an agreement had been reached to purchase Time Warner, in a deal valued at an estimated $85.4 billion. Fees for the various banks and other advisers involved easily could total hundreds of millions of dollars.

The mega-deal instantly touched off debate about too much concentrated corporate power, and skepticism regarding U.S. government approval. Immediate precedent is instructive here.

In early 2014, Comcast agreed to purchase Time Warner for $45 billion. The following year, however, the merger was nixed by the Feds. U.S. Attorney General Eric Holder bluntly announced that the proposed structure would give Comcast a dangerous dominant role in the internet. During this time, AT&T did successfully purchase DirecTV.

There have been similar big deals involving the giant companies that design, manufacture and market now pervasive portable phones. Microsoft purchased struggling Nokia, the Finnish paper company that helped launch the modern mobile phone. The deal countered criticism of Microsoft for caution despite holding a mountain of cash.

The global smartphone operating system market currently is defined largely by Apple and Google. The former pioneered the user-friendly desktop computer. Cofounder Steve Jobs eventually was forced out in a power struggle, only to return and engineer a brilliant turnaround centered on the iPod, iPhone and iPad. The devices have grown smaller even as the universe of readily available information rapidly expands.

As in the past, telephones, computers and good old TVs are helping to democratize the availability of information. Two continuous characteristics are complex interplay between technology and society, and active government oversight.

Information transmission is now characterized by vast rapid change, but at the start, telephone and computer companies enjoyed much more predictable structured commercial environments. Dominant corporations effectively controlled largely stable, predictable markets, in contrast to today.

Historically concentrated corporate power clearly threatened the public interest. John D. Rockefeller brilliantly built the Standard Oil Corporation into a powerful foundation of the American industrial economy, but monopoly of oil and kerosene production was also dangerous. Standard Oil could literally dominate the U.S. economy and shut down the government, including the military.

Antitrust prosecution broke up Standard Oil in 1911. Investigative journalist Ida M. Tarbell was instrumental in this result, thanks to her book “The History of the Standard Oil Company.”

Computer and communications companies also faced prosecution, though none had the power of Standard Oil. In 1969, the U.S. Justice Department went after IBM but dropped the suit in 1982. Entrepreneurs led by Apple were significantly weakening IBM’s hold. The market outmaneuvered the regulators.

The Feds had more success in pursuing AT&T with an antitrust suit begun in 1974. In 1984, the corporation was broken up. Southwestern Bell eventually purchased surviving long-distance carrier AT&T, re-adopted the name, and became a principal player over time.

In 1894, Ida Tarbell moved back to the U.S. after several years in Paris. Rather than rejoin family in Titusville, Pennsylvania, she settled in New York City, a courageous daring move then for a single woman.

However, as Steve Weinberg points out in “Taking on the Trust,” his book about her career, electricity was already radically transforming life in the great metropolis. Electric trains and lights permitted relatively safe, comfortable travel. Over time, technology was making life easier for the average person. Consumers benefitted from growing freedom of movement.

Investigator Tarbell also made excellent use of the newly available telephone.

— Arthur I. Cyr is Clausen Distinguished Professor at Carthage College and author of “After the Cold War.” Contact acyr@carthage.edu.

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